Opinion Former Article

The Lord Chancellor announced today measures to change the way the discount rate* is calculated. Proposals published in draft legislation would amend the Damages Act 1999. The proposals, if enacted would see the rate set by reference to ‘low risk’ rather than ‘very low risk’ investments. It is suggested this would bring the rate up to between 0-1% from its current level of minus 0.75%. The proposals would also ensure the rate is reviewed more regularly in future – at least every three years – and extend expertise available to the Lord Chancellor when carrying out the reviews by creating an independent expert panel in the process.

Speaking on behalf of the Medical Defence Union’s GP members, who because of the current discount rate are facing clinical negligence claims valued at over £20m per claim, Dr Matthew Lee, MDU Professional Services Director, gave the proposals a cautious welcome. He explained:

"We are pleased the proposals recognise that the way the rate is currently set is out of date and out of touch with reality and that it has to change. It is also good to see the Lord Chancellor will have access to expert advice in future to assist in making a decision with such profound implications for public service defendants. However, a rate of between 0-1% would still be too low in terms of its affordability. Even before the discount rate change in March, many GPs found they couldn’t afford to pay for indemnity and it was turning them away from practice.

"The MDU has held off passing on the cost of the previous discount rate change to GPs – which would be simply unaffordable for many - to give the government time to develop a promised solution to protect GPs. The high cost of indemnity, which GPs themselves have to pay, is driving doctors out of the profession and could put off junior doctors from choosing a career in primary care. The proposed change in the discount rate, even if enacted, will take time to implement and it won’t address the fundamental problem that compensation costs are out of control.

"We urgently need far more radical tort reform. The MDU is not the only organisation to say this. It was recognised by the National Audit Office (NAO) in the conclusion to its value for money report on NHS Resolution which today identified a need for urgent change to the legal system. It states:
‘The government needs to take a stronger and more integrated approach to fundamentally change the biggest drivers of increasing cost across the health and justice systems. It will require significant activity … in the areas of policy and legislation.'

"The MDU couldn’t agree more. Today’s discount proposals are a small step but the clinical negligence procedure needs root and branch reform."

*The discount rate is the interest rate used by courts to calculate lump sum compensation payments to victims of clinical negligence incidents and other personal injury claims.

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